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Electronic Signatures: How and When to Use Them in Business Contracts

Most contracts, agreements and other documents can now be signed with an electronic signature from the comfort of your computer, tablet, or phone. Electronic signatures allow you to sign, send, and manage the documents online from any device, anytime, or anywhere. E-signatures are beneficial because they can help increase workflow, which directly affects your bottom line. Below is a list of tips and suggestions for e-signatures for business contracts and agreements.

How To Ensure Electronic Signatures are Secure

Digital signatures enable paperless contracts and can speed up business transactions. The 2001 E-Sign Act was meant to ease the adoption of electronic signatures, yet the mechanics of what makes up an e-signature were left deliberately wide open. Years later, there is still widespread mistrust of e-signatures, even though they contain more evidence that a particular person signed a document at a particular time than a traditional pen-and-ink contract does. It’s common for clients to dispute a contract by questioning its original validity.

Such a client could claim that a digital signature fails to comply with the Federal E-Sign Act and run with it all the way to court. The root of most potential legal problems with an electronically signed document relates to the enforceability of that contract. This is one of the reasons why there are so many checkboxes that you accept the terms and agreement when agreeing to services or ordering goods online. A user who checks those boxes will have a difficult time arguing later that they didn’t understand what they were signing. The language of the contract can also be a problem, which is why a lawyer should look over a contract before your company releases it. It’s important to always consult a lawyer if you’re unsure about a contract and how it can affect you or your business.

There are three levels of electronic signatures:

Use a picture of your signature on any document, whether it’s a PDF, DOC, DOCX, or another file type. However, perhaps it’d be best to avoid using this tactic for commercial purposes, even though it would be legal if the signing parties could prove their intent with supporting evidence.

Sign one’s name to a document electronically by typing your name in one of the following formats:
For submissions to the Federal court system: /s/Courtney Smith
For submissions to the Patent & Trademark Office: /Courtney Smith/

Both the // and the /s/ methods are considered to be legitimate signatures under the Federal ESign Act, and acceptable enough for the legal industry. This tactic is typically used on lower priority contracts where enforceability is unlikely to be called into question. To keep the consumer disclosure portion of the Act in mind, a line should be added to the contract clearly indicating that the signatories have the option to opt out and sign with a paper signature instead. Use services like DocuSign and Adobe EchoSign. These services follow the letter and intent of the E-Sign Act, even considering international laws in the makeup of their services. These should be the choice for high-value transactions, such as real estate contracts.

With these services, you can sign the document yourself or request signatures from clients and colleagues, and when the document is fully executed, everyone gets a copy delivered right to their inbox. You also have the ability to see your documents progress with status notifications that keep you in the loop throughout. Fill out and sign documents in less than 30 seconds, and you’ll never print, sign, and scan again!

When Not to Use an E-Signature

Although e-signatures are simple and convenient, there are times when a pen-and-ink signature is best to use. Where a deceased person may be involved, such as with a health insurance policy or estate documents, a paper signature is a must since the person isn’t around to be questioned about intent in signing the document. Eviction notices, court orders, foreclosure notices and product recall notices should also contain a signature.

Keeping Records

The E-Sign Act states that if a business is required to keep a record of a contract, it must also keep an electronic record. This requirement goes a step further by requiring that all signatories have access to the signed file—and residence on a company server is an unacceptable method of storage. Services like Adobe EchoSign and DocuSign, however, let you keep a copy of the contract online on their servers, which all signatories can access. It’s also wise to consider that signatures can be secure with a complete audit trail of who signed and when. You can also verify the identity of signers with advanced authentication.

Changing Your Habits

If you’re using copied and pasted signatures on digital contracts, stop now. Using e-signature services are overall the safest and reliable way to sign, secure, and share important documents with clients, customers, colleagues, and partners.